Facebook likely to go public in 2012, WSJ says
Facebook intends to cross the 500-investor mark this year, a move that will force the company to begin reporting financial information to the Securities and Exchange Commission, according to the Wall Street Journal, which obtained a copy of a 100-page private-placement memo being sent to investors.
The memo indicates that the social networking giant is likely to go public in 2012, according to the Journal report.
The 500-shareholder rule was put into place to ensure that companies make adequate disclosures about their financial health as they grow. If a company has more than 499 investors at the end of a fiscal year, it must begin quarterly and annual financial reports to the government within 120 days.
There has been speculation that Facebook was trying to avoid an initial public offering. Goldman Sachs is using a special purpose vehicle for its reported $450 million investment in the social networking firm. That vehicle allows Goldman to buy shares as a single holder, then accpt money from investors who essentially pay the firm for indirect ownership of Facebook. Dealbook has a good explanation of this rule. (Disclosure: Washington Post Co. Chairman Donald E. Graham is a member of Facebook's board of directors.)
John Coffee, a law professor at Columbia University, told the Wall Street Journal, "A number of companies, including Google and Apple, became reporting companies well ahead of doing an IPO," Mr. Coffee said.
Critics of the deal say that's a good thing. In a post titled "What Everyone Seems to Miss In Facebook's Private or Public Debate..." John Battelle said that a company that holds as much personal data as Facebook does ought to be held to the scrutiny of a public company.
| January 6, 2011; 8:35 PM ET
Categories: Facebook, Social media
Save & Share: Previous: CES: Verizon CEO Seidenberg's keynote
Next: CES: Net neutrality ahead: Hill hearings, court challenges